The Bank of America, the second-largest bank in the United States, has reportedly given the green light for some of its clients to trade cash-settled Bitcoin (BTC) futures. While there hasn’t been an official announcement from the bank itself, two anonymous sources have come forward with the information, according to Coindesk.
One of these sources notes that a large amount of margin is required to trade these futures and cites this as one of the primary reasons for the recent development. According to the same source, select clients are able to trade the Bitcoin-based derivatives and some of these may have already gone live.
The bank will be using the Chicago Mercantile Exchange (CME) futures which were launched in 2017 and have seen increasing participation by institutional investors. CME became the biggest Bitcoin futures trading platform earlier this year, showcasing a continued interest from institutional investors even as the market took a dive.
Bank of America and Bitcoin – A Difficult Relationship
Traditional financial institutions have had a bumpy relationship with Bitcoin, and Bank of America is no exception. The bank has previously banned cryptocurrency purchases made with their credit cards and has also stated its case for Bitcoin as a poor store of value, even as institutional demand was on the rise.
The bank has also publicly distanced itself from any cryptocurrency-related businesses. Brian Moynihan, CEO at Bank of America, spoke to the Senate Banking Committee on May 21, stating:
“Currently, we do not lend against cryptocurrencies and do not bank companies whose primary business is a cryptocurrency or the facilitation of cryptocurrency trading and investment.”
Banks are Changing Their Stance on Crypto
Despite the difficult history, it seems that the institution is changing its stance on the digital asset, joining other banks in the U.S. which have also been working with Bitcoin and other cryptocurrency products.
In fact, Bank of America itself launched a cryptocurrency research team earlier this month, as reported by Bloomberg. In a memo addressed to Merrill Lynch Wealth Management employees and partners, Candace Browning, head of global research, stated:
“Cryptocurrencies and digital assets constitute one of the fastest-growing emerging technology ecosystems,” Browning continued: “We are uniquely positioned to provide thought leadership due to our strong industry research analysis, market-leading global payments platform and our blockchain expertise.”
The Bank of America is just one of the latest to capitalize on the cryptocurrency market, with a growing number of investment banks providing access to cryptocurrency-based products to their clients, including Goldman Sachs and Charlotte, the latter of which has also created a cryptocurrency research team.
Institutional Investment and Mainstream Use Cases
The latest news from Bank of America may spell bullish signs for Bitcoin. As the access to regulated Bitcoin investment products continues to grow, it is likely that institutional engagement and trust will grow alongside it, especially as further applications for the long-awaited United States-based Bitcoin Exchange Traded Fund (ETF) continue to surface.
While The Securities and Exchange Commission (SEC) has shot down several promising proposals for U.S. Bitcoin ETFs, other countries have already taken the step to allow Bitcoin ETFs to be traded. Both Canadian and European markets, among others, have listed Bitcoin ETFs and have seen positive signs of adoption, with two of the Canadian crypto ETFs surpassing $1 billion in volume.
While institutional investment in Bitcoin solidifies its position as a digital store of value and new asset class, the creation of mainstream use cases for the cryptocurrency seems to have a much more meaningful impact on the market, at least in the short term.
Recent rumors of a possible integration by Amazon had a noticeable effect on the price of Bitcoin. While these rumors were quickly shot down by Amazon, the events showcase how mainstream use cases for Bitcoin may be a much more relevant factor when it comes to price action.